PALANCA v.

FRED WILSON
G.R. No. 11310 / JAN 31, 1918 / MALCOLM, J./Parole Evidence/AJLCarde0

NATURE
PETITIONERS
RESPONDENTS

Appeal from judgment of CFI Manila

Carlos Palanca
Fred Wilson & Co.

SUMMARY. Song Fo purchased from Wilson a distilling apparatus. Song Fo

then sued Wilson because the distilling apparatus could only produce 480
liters instead of the 6,000 liters "capacity" in the contract of sale. Wilson
said that term "capacity" in the contract was for the "treatment" of 6,000
liters (as raw material) and not the "production" of 6,000 liters. SC
confirmed that capacity in this case meant treatment.
DOCTRINE. That a written agreement shall be presumed to contain all the
terms, nevertheless "does not exclude other evidence of the circumstances
under which the agreement was made, or to which it relates, or to explain
an intrinsic ambiguity." Surrounding circumstances are taken into
consideration to ascertain the true meaning of the contract.
FACTS.

Song Fo & Co. (with Carlos Palanca as manager), purchased from

Wilson & Co. a distilling apparatus.

Song Fo then sued Wilson for breach of contract since the said distilling
apparatus apparently could not produce the amount of alcohol
stipulated in the contract.

According to Song Fo, the contract of sale was supposedly for a

distilling apparatus with a "capacity" of 6,000 liters, but the machine
turned out to produce only 480 liters.

Wilson said that term "capacity" in the contract was for the "treatment"
of 6,000 liters and not the "production" of 6,000 liters.

Palanca: He told the agents of Wilson that he needed a machine that

could "produce" at least 6,000 liters of alcohol a day.
Wilson's Agent: Palanca asked him to get a price on an apparatus to
"treat" 6,000 liters.

CFI Manila: Song Fo no award, and Wilson to recover Php 5,000 (last
installment) with interest.

ISSUES & RATIO.

1. WON Fred Wilson & Co. is liable for breach of contract. - NO

The agreement was for the "treatment" of 6,000 liters, not

"production".

The SC resolved the issue in the 1st clause of the contract from 2
directions:
(1) By taking up the meaning of the words themselves;
and
(2) By evidence of the circumstances under which the
agreement was made (focus for this case).

Sec. 285 of the Code of Civil Procedure provides that a written

agreement shall be presumed to contain all the terms,
nevertheless "does not exclude other evidence of the
circumstances under which the agreement was made, or to
which it relates, or to explain an intrinsic ambiguity."

Wilson furnished Song Fo with plans and specifications of the

distilling apparatus which describe a capacity of 6,000 liters of
jus (ferment).

Wilson mentioned the capacity to Song Fo only in express

connection with the name and description of the machine "as
illustrated in the catalogue."

Again, in Wilson's order to manufacturer, it mentioned a capacity

of 6,000 liters per day in connection with the "description in the
maker's catalogue."

Lastly, a machine capable of producing 6,000 liters of rectified

alcohol every 24 hours from nipa ferment would cost about Php
35,000 to Php 40,000.

The proper construction then of the 1st clause in the contract (in
connection with the conduct of the parties and surrounding
circumstances) is that Wilson would provide Song Fo with a
distilling apparatus that is capable of "receiving or treating"
6,000 liters every 24 hours of work.

DECISION.
CFI Judgment AFFIRMED.